LONDON MARKET OPEN: Pound stronger ahead of UK budget; stocks mixed

(Alliance News) - Stocks in London were mixed at the open on Thursday, but sterling was rising, ahead of the long-awaited autumn budget from UK Chancellor Jeremy Hunt.

"Today, the much-expected budget announcement will finally hit the fan. And it won't be pretty. The UK braces for 'austerity on steroids' wrote Bloomberg, reminding that [UK Prime Minister Rishi] Sunak's government must fill in a GBP55 billion hole by increasing taxes and cutting spending. For investors, though, austerity means a more stable budget, less negative pressure on the sovereign bonds, and an ideally stronger British pound," said Ipek Ozkardeskaya at Swissquote.

The pound rose to USD1.1950 on Thursday morning in London, up from USD1.1883 late Wednesday.

The FTSE 100 index opened down 7.54 points, 0.1%, at 7,343.65. The mid-cap FTSE 250 was up 21.01 points, or 0.1%, at 19,133.41, but the AIM All-Share was down 1.25 points, or 0.2%, at 838.63.

The Cboe UK 100 was down 0.2% at 733.93. The Cboe UK 250 was up 0.1% at 16,482.14. The Cboe Small Companies was down 0.2% at 12,888.52.

In the FTSE 100, Burberry was up 0.1% after the luxury clothing and accessories retailer reported a strong rise in interim profit and revenue, but maintained its near-term guidance amid a "challenging" economic environment.

For the six months that ended October 1, Burberry posted a pretax profit of GBP251 million, up 31% from GBP191 million in the six months to September 25 last year. Revenue rose by 12% to GBP1.35 billion from GBP1.21 billion.

However, given the potential impact of continued Covid-19-related disruption in China, as well as recessionary risk in Europe and the Americas, Burberry said it has decided to maintain its near-term guidance through to financial 2024.

Hargreaves Lansdown fell 1.8% after RBC cut the financial services firm to 'sector perform' from 'outperform', with a price target of 1,050 pence.

Flutter Entertainment was up 1.6%. At an investor day on Wednesday, the Paddy Power-owner had talked up the strength of its US business, as FanDuel continues to gain traction.

It said FanDuel is the "number one" sports betting operator in the US, with a 42% share of the online market.

"We are confident in a path to a 2030 total addressable market of more than USD40 billion in gross gaming revenue which represents growth of 4.5 times the size of the market today," the gambling firm said.

In the FTSE 250, International Distribution Services fell 1.7%, as the company formerly known as Royal Mail swung to an interim loss.

IDS swung to a GBP127 million pretax loss in the six months that ended September 25 from a profit of GBP315 million a year before, as revenue slipped by 3.9% to GBP5.84 billion from GBP6.07 billion.

Revenue at Royal Mail, its UK arm, was down 10.5%, while it was up 9.5% in sterling terms at international business GLS.

"In the event that significant change within Royal Mail is not achieved," IDS said, "all options remain open to protect the value and prospects of the group, including separation of the two companies."

IDS declared no interim dividend but said it may pay a final dividend from the earnings of GLS.

Grainger rose 1.0%. The residential landlord reported a "very successful year" in which it delivered record net rental income growth and record occupancy.

In the year that ended September 30, Grainger said pretax profit nearly doubled to GBP298.6 million from GBP152.1 million.

It said the profit figure included a GBP81.2 million valuation uplift from one-off transfers from a trading property to an investment property in the year.

Net rental income jumped 22% year-on-year to GBP86.3 million from GBP70.6 million. In the year, rent collection averaged at 98% and occupancy held above 90%.

Elsewhere in London, Keller rose 1.8%. The engineering firm said trading since its half-year results has continued at record levels, despite a challenging macro environment.

As a result, Keller remains on track to deliver a full-year performance in-line with expectations, aided by a FX tailwind.

Stocks on the European continent were higher. The CAC 40 index in Paris was up 0.3%, and the DAX 40 in Frankfurt was 0.8% higher. The euro traded at USD1.0403, flat against USD1.0405.

In Asia, stocks ended in the red. The Shanghai Composite ended down 0.2% and the Hang Seng in Hong Kong closed 1.2% lower. In Tokyo, the Nikkei 225 closed down 0.4%. The S&P/ASX 200 in Sydney closed up 0.2%.

In the US on Wednesday, Wall Street also had ended lower, with the Dow Jones Industrial Average down 0.1%, the S&P 500 down 0.8% and the Nasdaq Composite down 1.5%

CMC Market's Michael Hewson said US markets came under pressure after a disappointing quarterly update from Target "clobbered" the retail sector and knocked the wider market lower.

Target shares slid 13% in New York, after it struck a cautious tone ahead of the key Christmas and Black Friday trading periods.

"Based on softening sales and profit trends that emerged late in the third quarter and persisted into November, the company believes it is prudent to plan for a wide range of sales outcomes in the fourth quarter, centred around a low-single-digit decline in comparable sales, consistent with those recent trends. Similarly, the company is now planning a wide range for its fourth quarter operating margin rate centred around 3%," Target said.

Target's quarterly results contrasted with a largely positive update from Walmart on Tuesday. Walmart shares added to Tuesday's 6.5% gain with 0.7% rise on Wednesday.

"Several more Fed speakers also added to the mix with comments from New York Fed President John Williams, Mary Daly of the San Francisco Fed and Feb board governor Christopher Waller who reiterated his weekend comments in Australia, while also confirming he would be open to a 50bps rate hike next month," CMC's Hewson added.

Waller said recent signs of easing inflation pressures and a slowing US economy could allow the central bank to dial back the pace of interest rate hikes.

His comments came after reports showing US inflation eased in October, with the consumer price index logging its lowest annual rise since January – fuelling hopes that price rises are starting to slow.

Gold dropped sharply to USD1,769.29 an ounce early Thursday from USD1,777.45 late Wednesday. Brent oil fetched USD92.76 a barrel, up from USD91.89. Against the yen, the dollar was quoted at JPY138.91, down from JPY139.43.

Still to come on Thursday, there is a eurozone inflation reading at 1000 GMT, before the UK autumn statement around 1230 GMT.

By Heather Rydings; heatherrydings@alliancenews.com

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